Dodd-Frank - All posts tagged Dodd-Frank

Wells Fargo & Co. CEO John Stumpf, speaking Wednesday at the New York Press Club in Washington, D.C., questioned whether the banking industry had enough rules and regulations when it came to ‘too big to fail.’

Let\’s hope for no rain in NYC. Here\’s your hump day banking roundup: French President Francois Hollande prepares to confront Obama on BNP, senators approve a tweak to Dodd-Frank and Carl Icahn is worried about allegations of insider trading derailing a deal.

That was fast. One minute J.P. Morgan Chase & Co.’s head of commodities was on an advisory committee at the Commodity Futures Trading Commission and then she wasn’t.

On Thursday it was announced Blythe Masters would join the prestigious Global Markets Advisory Committee and on Friday the CFTC confirmed the industry veteran had withdrawn her name. This was first reported on CNBC.

This senior level committee, known as GMAC, looks at futures and other more-complex derivatives in the industry and hears from major market participants that give the CFTC guidance on the issues. In fact, the committee has representation from every major bank on Wall Street. Now minus J.P. Morgan.

The importance of being on this committee can be spelled out by the fact that it covers derivatives, that have the most global financial transactions in the markets, say experts.

Among the big topics being discussed are cross boarder issues when it comes to trading derivatives and interface with global regulators, say industry observers.

That is the general consensus from analysts and experts on the history making Volcker rule voted in on Tuesday by five regulatory agencies, as part of the Dodd-Frank. That doesn’t mean the banking industry is breathing a sigh of relief, far from it.

\”The big five U.S. regulators appear to have actually read the comment letters from their first draft and chosen to be reasonable,\” said Brad Hintz, analyst at Sanford C. Bernstein & Co.

\”There doesn’t seem to be any material onerous requirement in the final rule compared to expectations,\” said Gerard Cassidy at analyst at RBC. \”Compared to pre-financial crisis, it’s is very onerous, they cannot do prop trading.\”

\”This is the “reasonable man” standard on a massive scale and naturally that is very vague,\” said Chris Kotowski, analyst at Oppenheimer & Co.

The final rules spelled out what banks are prohibited from doing:

• engaging in short-term proprietary trading of securities, derivatives, commodity futures and options on these instruments for their own account.

• owning, sponsoring, or having certain relationships with hedge funds or private equity funds, referred to as ‘covered funds.’

Treasury official Cyrus Amir-Mokri told a New York panel Thursday that more rules and regulations are needed to prevent a \”too big to fail\” situation from developing again, as it did during the financial crisis.

Amir-Mokri, who is the assistant secretary for financial institutions, spoke at The Clearing House conference in New York.

He said new regulations such as Dodd-Frank are “designed to maintain the stability” of the financial industry without having to go through that again. But he added that there is still “a lot of work that needs to be on done on this.”

There’s lot of talk recently about the top leadership of Wall Street’s most elite firm Goldman Sachs Group Inc. and when Chairman and Chief Executive Lloyd Blankfein will step down.

Bloomberg

Lloyd Blankfein and Gary Cohn

The New York Times on Thursday suggested the firm’s President and Chief Operating Officer Gary Cohn is getting impatient to take over the reins of one of the street’s most storied firms:

“Mr. Cohn is growing increasingly restless, according to friends and colleagues. Some inside Goldman wonder if he will depart if Mr. Blankfein doesn’t move soon. That would throw a monkey wrench into Goldman’s succession plans, leaving the firm without a natural candidate ready to replace Mr. Blankfein.”

The discussion on when the Federal Reserve will increase interest rates is good for the market, Lloyd Blankfein, Goldman Sachs CEO told a Washington D.C. audience on Thursday.

“It makes sense to create incremental uncertainty that it is about to switch,” said Blankfein. “There will be some jarring, but I don’t think it will be extreme, the fact that we are a talking about it.”

Blankfein was speaking about the Federal Reserve\’s bond buying program, which is reducing supply in the market for Treasury bonds, has has kept 10-year Treasury yield close to 2%.

\”Eventually interest rates have to normalize,\” said Blankfein. \”It’s not normal to have 2% rates.\”

Financial stocks were the highest performing sector in the S&P 500 in May, as the month comes to a close. The Financial Select Sector SPDR Fund
, which tracks financial stocks in the S&P 500, was up 7.5% for the month, compared to half that in the broader market in the same period. In contrast U.S. Treasury bond yield curve has have steepened, which analysts say is a good sign of bank profits.

“The steepening is definitely good for banks, as banks these days make their money on the net income margin,” said Larry McDonald, author of Colossal Failure of Common Sense. “The steeper the curve, the bigger the spread between where they borrow and where they lend.”

There are too many financial regulatory agencies in the U.S., said former Federal Reserve Chairman Paul Volcker in a speech at the Economic Club of New York on Wednesday.

\”The simple fact is the United States doesn\’t need six financial regulatory agencies. It\’s a recipe for indecision, neglect and stalemate, adding up to ineffectiveness,\” said Volcker. \”The time has come for change.\”

The lack of agreement on key regulations and their enforcement is simply unacceptable to the financial industry as well as in terms of effective governance, he added.

If current efforts to rein in the nation’s big banks with increased regulation doesn’t work, the next option is to force banks to become much smaller, was the message from the New York Federal Reserve’s President, speaking to the Economic Club of New York on Monday.

There are two debates happening when it comes to bank policy, William Dudley told the audience.

One is to go down the current path of increased regulations and stabilization of the banking industry, after the financial crisis brought many major banks to the brink of bankruptcy. Banks incurred massive losses on mortgage-backed securities and other assets, which dramatically reduced the capital stability of the financial industry. Some of the biggest banks in the country had to be bailed out by the Government in 2008.

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